Question

Explain in details how Fraud can be reported to Management and the Audit Committee

Answer 1

Answer:-

As per SA-200 , the primary objective of audit is to express an opinion on financial statement whether

a. The financial statements are showing true and fair view or not

b. They are prepared in accordance with applicable financial reporting framework

The responsibility for the prevention and diction of fraud and error is of the management through the implementation of an internal control system. The presence of such a system reduces but does not eliminate the possibility of fraud error. One of the audit objectives is to detect the fraud or error resulted in the accounts. To ensure that fraud or error has not occured it will be detected by him during the course of his audit, the auditor adopts the several audit techniques. Consequently, the auditor gets reasonably satisfied that fraud or error has not occured or even it was occured, the effect of fraud or error is properly corrected.

It may be concluded from the above the detection of fraud and error is not the duty of the auditor provided that he complies with the requirements given in standards on auditing, maintain professional skepticism throughout the audit and is not grossly negligent in the performance of his duties as an auditor.